Canadian Airlines is considering setting up a discount carrier to cut costs and boost revenues, sources at the Calgary-based airline say.

The move is part of a restructuring aimed to make it easier for money-losing Canadian to attract new investors. It is unclear how the new entrant would operate, or whether it would involve Canadian's regional carriers.

Operating a no-frills airline would also help Canadian battle WestJet Airlines, the start-up Calgary discount carrier turning in a profit in Western Canada. WestJet announced earlier this year that it and Air Canada were discussing a partnership that could see it take over or augment the national carrier's routes in the west of the country.

The talks are aimed at finding a cost-effective way to increase flights that does not involve equity transfers or ownership.

Canadian is expected to report a first-quarter loss of up to C$140 million ($93 million) at the end of the month, following a fourth-quarter loss of C$150 million.

Source: Flight International